Options Home Health of North Florida, Inc. v. Nurses Registry & Home Health Corp.
946 F. Supp. 2d 664
| E.D. Ky. | 2013Background
- Options sold substantially all assets to Nurses Registry for $650,000 under an Asset Purchase Agreement (APA).
- Closing Statement later conditioned payment on the issuance of Options’ Medicare license, reallocating the purchase price and promising void ab initio if the license was not issued.
- 36-month rule under 42 C.F.R. § 424.550 prevented transfer of Options’ Medicare license to Nurses Registry, leading to a new CMS license rather than a transfer.
- Nurses Registry obtained its own CMS license in August 2011 but did not complete payment of the remaining purchase price or the $75,000 severance owed to Options/Goode.
- CMS denied final reimbursement under Options’ license for services billed during the interim, creating Medicare overpayment liability that Options (and former owners Virgo and Goode) seek to recover.
- Court determines Closing Statement created an absolute condition; the contract became void ab initio, but Nurses Registry was unjustly enriched by retained assets and must address quantum meruit and overpayments in damages proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the Closing Statement create an absolute condition voiding the contract if the license could not be transferred? | Closing Statement required license issuance; transfer was sufficient if issued to Nurses Registry. | APA and Closing Statement contemplated transfer of Options’ specific license; issuance of a new license sufficed under the Closing Statement. | Partial judgment for Plaintiffs; Closing Statement rendered contract void ab initio; but unjust enrichment remains to be resolved. |
| Are Nurses Registry’s fraud or negligent misrepresentation claims viable given the license transfer issue? | Options knew the license couldn’t be transferred; misrepresentation claim lacks evidence. | Plaintiffs misrepresented transferability and induced the contract. | Denied; the court grants summary judgment to Plaintiffs on these counterclaims. |
| What is the appropriate remedy for the contract void ab initio scenario in light of unjust enrichment? | Nurses Registry retained Options’ assets without paying, triggering unjust enrichment. | Void ab initio absolves obligations; no recovery. | Partial summary judgment for Plaintiffs; unjust enrichment applies; damages to be decided at trial. |
| Are Medicare overpayments recoverable and do Virgo/Goode have standing to pursue them? | CMS overpayments were charged to Options; Virgo/Goode have standing due to injury-in-fact and potential CMS denial of future enrollment. | Options is defunct; standing and ripeness are questionable; claim not properly before court. | Plaintiffs have standing; the claim is ripe and properly before the court; overpayments are adjudicated under unjust enrichment. |
Key Cases Cited
- GenCorp., Inc. v. Am. Int’l Underwriters, 178 F.3d 804 (6th Cir. 1999) (extrinsic evidence may be used to interpret ambiguous contract terms)
- Leary v. Daeschner, 349 F.3d 888 (6th Cir. 2003) (good cause requirement for amendment when deadline passed)
- Anderson v. Merck & Co., Inc., 417 F. Supp. 2d 842 (E.D. Ky. 2006) (preliminary injunction standards; summary judgment framework)
- Jones v. Sparks, 297 S.W.3d 73 (Ky. App. 2009) (unjust enrichment; elements and measure of value)
- Bassett v. Nat’l Collegiate Athletic Ass’n, 428 F. Supp. 2d 675 (E.D. Ky. 2006) (reasonableness of reliance in misrepresentation cases)
- U.S. ex rel. SNAPP, Inc. v. Ford Motor Co., 532 F.3d 496 (6th Cir. 2008) (fraud pleadings with particularity requirement)